Yahoo Finance Adagene Inc. (NASDAQ:ADAG) most popular amongst private equity firms who own 39% of the shares, institutions hold 30%
Key Insights
Significant control over Adagene by private equity firms implies that the general public has more power to influence management and governance-related decisions
52% of the business is held by the top 5 shareholders
If you want to know who really controls Adagene Inc. (NASDAQ:ADAG), then you'll have to look at the makeup of its share registry. We can see that private equity firms own the lion's share in the company with 39% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Meanwhile, institutions make up 30% of the company’s shareholders. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders.
Let's take a closer look to see what the different types of shareholders can tell us about Adagene.
See our latest analysis for Adagene
What Does The Institutional Ownership Tell Us About Adagene?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
We can see that Adagene does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Adagene's historic earnings and revenue below, but keep in mind there's always more to the story.
Adagene is not owned by hedge funds. Impresa Management LLC is currently the company's largest shareholder with 11% of shares outstanding. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 10% by the third-largest shareholder. Furthermore, CEO Peter P. Luo is the owner of 3.3% of the company's shares.
To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of Adagene
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
We can see that insiders own shares in Adagene Inc.. In their own names, insiders own US$6.5m worth of stock in the US$117m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.
General Public Ownership
With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Adagene. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Equity Ownership
Private equity firms hold a 39% stake in Adagene. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Private Company Ownership
We can see that Private Companies own 13%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 3 warning signs for Adagene (1 is a bit concerning) that you should be aware of.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
